HEAD-TO-HEAD: Janus Henderson versus Threadneedle

123456

Bhavik Parekh, Morningstar

Introduction

The eurozone economy has outperformed consensus estimates, with the level of economic activity just 0.5% below its pre-pandemic peak, according to Schroders.

Europe has seen rising Covid-19 infections in recent weeks, with some countries re-introducing restrictions as a result. However, prolonged lockdowns – as they had at the start of the pandemic – appear unlikely. Vaccination levels in developed European countries are high, booster vaccines are coming and there is the prospect of Covid-19 treatments in pill form.

Demand has so far been sufficiently robust that many companies have been able to raise prices to offset rising costs. There are some signs indicating that Europe may have already reached the peak for certain cost pressures – such as for some metals, Martin Skanberg, fund manager of European equities at Schroders, said in a research report.

Companies which have been able to pass on those rising costs could find themselves in a very strong position in 2022 in terms of profit margins if cost pressures abate, he added.

Europe is also well-placed to benefit from the trend of re-shoring supply chains, said Skanberg. In particular, the capital goods sector. In addition, the technology leaders should perform well, notably Europe’s semiconductor equipment firms which are experiencing soaring demand as the world digitalises and chipmakers build out extra capacity.

Meanwhile, financials and especially bank stocks tend to fare well when inflation and interest rates are rising, as it enables them to reprice loans, according to Skanberg.

Credit Suisse is also bullish on the Eurozone, it said in a recent investment outlook report. The bank expects earnings to be the key driver for global equities, and this is also true for the Eurozone. The consensus earnings forecast for the Eurozone is among the highest in the major developed markets, supporting the bank’s constructive outlook on Eurozone equities.

Against this background, FSA asked Bhavik Parekh, manager research analyst at Morningstar, to select two European equity products for comparison: the Janus Henderson Continental European Fund and the Threadneedle European Select Fund.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 2 November 2021)

123456